Difference between Bookkeeping and Accounting with Meaning: Bookkeeping is an activity concerned with the recording of financial data relating to business operations in a significant and orderly manner. It covers procedural aspects of accounting work and embraces the record-keeping function. Obviously, bookkeeping procedures are governed by the end product, the financial statements. The term ‘financial statements’ means Profit and Loss Account and Balance Sheet including Schedules and Notes forming part of Accounts.
Book-keeping:
Bookkeeping is mainly concerned with the recording of financial data relating to business operations in a significant and orderly manner. It is concerned with the permanent record of all transactions in a systematic manner to show its financial effect on the business. It covers procedural aspects of accounting work and includes record-keeping functions. Must Check Accounting Concept.
Book Keeping is the science and art of correctly recording in books of account all those business transactions that result in the transfer of money or money’s worth. It is mechanical and repetitive. This work of bookkeeping is of clerical nature and is usually entrusted to junior employees of the accounts section of a business house. Nowadays, most of the book-keeping work is done through computers and other electronic devices. In fact, accounting is based on a systematic and efficient bookkeeping system.
The main purpose behind bookkeeping is to show the correct position regarding each head of income and expenditure as well as assets and liabilities. Further, bookkeeping is meant to show the effect of all the transactions made during the accounting period on the financial position of the business. You may also like Accounting Concept.
Book-Keeping and Accounting
Bookkeeping and accounting are often used interchangeably but they are different from each other. Accounting is a broader and more analytical subject. It includes the design of accounting systems that the bookkeepers use, preparation of financial statements, audits, cost studies, income-tax work, and analysis and interpretation of accounting information for internal and external end-users as an aid to making business decisions. This work requires more skill, experience, and imagination. The larger the firm, the greater the responsibility of the accountant. It can be said that accounting begins where bookkeeping ends. Bookkeeping provides the basis for accounting.
Some people mistake bookkeeping and accounting to be synonymous terms, but in fact they are different from each other. Accounting is a broad subject. It calls for a greater understanding of records obtained from bookkeeping and an ability to analyze and interpret the information provided by bookkeeping records. Bookkeeping is the recording phase while accounting is concerned with the summarising phase of an accounting system. Book-keeping provides necessary data for accounting and accounting starts where book-keeping ends
The following are the points of distinction between book-keeping and accounting:
| Book-Keeping | Accounting |
|---|---|
| (i) It is concerned with the recording of transactions. | (i) It is concerned with the summarizing of the recorded transactions. |
| (iii) Bookkeeping constitutes the base for accounting. | (ii) The work of an accountant requires a higher level of knowledge, conceptual understanding, and analytical skills. |
| (iii) Accounting starts where bookkeeping ends. | (iv) Bookkeeping is done in accordance with basic accounting concepts and conventions. |
| (v) Financial statements do not form part of bookkeeping. | (iv) The methods and procedures for accounting for analysis and interpretations for financial reports may vary from firm to firm. |
| (vi) The financial position of the business cannot be ascertained through book-keeping records. | (v) Financial statements are prepared in accounting process from the book-keeping records. |
| (vi) The financial position of the business is ascertained on the basis of accounting reports. | (vi) Financial position of the business is ascertained on the basis of accounting reports. |
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